Written by Gary
Closing Market Commentary For 02-26-2014
The SP500 broke down below symmetrical triangle at 3:15 and never moved back up into the triangle. Volume has been moderate as the averages broke down below the resistance and then falling out of the symmetrical triangle, both bearish signals.
By 4 pm the large cap were in the green and the small caps were in the red and flat. Are we set for another correction? As I said yesterday, Mr. Market hasn't finished playing with us, so be very careful, cautious and have your finger on the sell button.
The short term indicators are leaning towards the hold side at the close. Why 'hold', because the all important signs of reversal, up or down, have not been observed. The 50DMA, MACD, volume and a host of other studies have not turned, only a past 6% correction (and recovery) and that is not enough for me to start shorting. I would advise caution in taking any position during this volatile transition period of Mr. Market trying to figure out which way he wants to go.
Several notes of negativity are that the daily volume is very low matching the period of historical highs a few weeks ago and that could set the stage for addition weakness and market decline. The longer MACD view is starting uphill, but not convincingly signaling a continued up trend.
There is a 3 day Symmetrical triangle forming with the apex ending tomorrow or Friday and it appears it ended today. Nine times out of 10, the breakout will occur in the direction of the existing trend. But, if you are looking for an entry point following a symmetrical triangle, (says one analysts) jump into the fray at the breakout point. Investors have experienced early breakouts only to give investors a "head fake and that may be what we saw today." Hold off for a day or two after the breakout and determine whether or not the breakout is for real.
Here is what the SP500 triangle looks like with the resistance at 1848.
Here is a closer view.
There is continuing pressure to climb higher if only to test the previous Blue Chip highs (7 tests so far), but we may have to see some more 'consolidation' or sideways trading before we can start counting our 'Bulls'. The latest question investors have lately is, will the SP500 go above the resistance at 1848/50 and close there? This is the historical closing high and there are many doubts that the SP500 can go higher for a 7 try and remain above 1850.
In looking at the 50 DMA the current SP500 is somewhat above that line, but way above the 200 DMA and on 02-06-14 crossed above the 100. I can not see, as of right now where the MA's are rolling over to indicate any permanent bear run. The 50 DMA has flattening out, but not descending which is always the first sign the bears are smacking their lips in anticipation of a medium rare steak.
The longer 6 month outlook is now 35-65 sell and will remain slightly bearish until we can see what the effects are in the game of the Fed's 'Tapering'. By the end of March investors should know how the taper and emerging markets are going to work out in relationship to the stability of the US financial markets and their ability to not to slide further downward.
Also, many pundits have stated that we may have seen the top - but I wouldn't count it as long as the Fed continues to hand out 'Market Viagra', even if it is being reduced somewhat! I would like to see a blowout candle (shooting star) to verify a top along with heavy volume to signify a market top.
The candle for 02-19-2014 SP500 could be interpreted as a shooting star or a Dark Cloud, but the volume wasn't very convincing and 02-21-2014 action does not wholly confirm it. It happened again on Monday (02-24-2014) and Tuesday (02-25-2104) ended in a red spinning top that usually means a direction change and perhaps a confirmation of a descending market place.
Wednesday (today) has another spinning top suggesting we could see change of direction once again, but is it going to be down or up?
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The DOW at 4:00 is at 16198 up 19 or 0.12%.
The SP500 is at 1845 up 0.04 or 0.00%.
SPY is at 184.73 down 0.02 or -0.01%.
The $RUT is at 1182 up 7.77 or 0.66%.
NASDAQ is at 4292 up 4 or 0.10%.
NASDAQ 100 is at 3677 down 3 or -0.07%.
$VIX 'Fear Index' is at 14.35 up 0.68 or 4.97%. Neutral Movement
The longer trend is up, the past months trend is sideways, the past 5 sessions have been positive and the current bias is down with a slight positive slant.
WTI oil is trading between 101.58 and 102.85 today. The session bias is negative and is currently trading down at 102.48.
Brent Crude is trading between 109.68 and 109.96 today. The session bias is negative and is currently trading down at 109.41.
Gold fell from 1345.50 earlier to 1322.84 and is currently trading up at 1329.40. The current intra-session trend is sideways.
Dr. Copper is at 3.197 falling from 3.239 earlier.
The US dollar is trading between 80.12 and 80.54 and is currently trading down at 80.44, the bias is currently negative.
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Written by Gary